I have a thesis on that. Today we have around 20 companies that are US-based, doing some element of product development in India, either a little or all the way. We call them cross-border companies. The CEO, marketing teams and initial product architecture teams are in the US while product delivery is done from India. The obvious question that comes up is: when will India get to a point where even the initial team is based here. There are a few impediments to that issue. First, let me explain what kinds of product companies we’re interested in. We’re not interested in companies that want to replicate something at a cheaper cost. You can’t build large companies that way. We’re interested in finding disruptive opportunities. One of the things we’ve learnt the hard way over many years of investing in product companies in the US is that, companies fail for a variety of reasons. The issue isn’t about building the product. It is building the right product. Sometimes engineers build a product that nobody wants. That’s the problem with setting up product companies in India today – the early adopters of technology are 10,000 miles away. Customer intimacy becomes a problem. Product development skills are available in India today but not product management skills. The reason for that is customers are too far away. You need to set up a front office in the US and empower those people. So you might as well have a cross-border company.
Do you see this changing soon? What factors will drive the change?
I think the picture will change slowly over the next four to five years. In some ways, the story is not dissimilar to what happened in the US. Twenty years ago when wages started rising rapidly, companies began to use technology efficiently and very aggressively to improve productivity. Companies India will face the same escalation in salaries and will have to deploy technology so that productivity stays ahead. When that happens, this will become a larger market for products. The second factor is that as the market opens up more, Indian companies will have to compete with foreign companies. Foreign companies will come in with their latest and greatest technological expertise. Case in point – Reliance Retail. They will face competition from Bharti Retail, which is aligned with Walmart. When Walmart comes in with the back-office, they will have the latest data warehousing and analytics capabilities. Now, if Reliance is going to succeed, and I believe they will, they will have to use the same technology. So, Reliance will become an early adopter of technology. As more Indian enterprises become early adopters of technology, product innovation will become easier. Some of that is already happening in the wireless sector. Our goal is to lay the groundwork and figure out what kinds of technology is more likely to get deployed here.
How do view the mobile wireless opportunity here?
India is growing at 5 million subscribers a month, which has mind-boggling issues. The larger players, about three or four of them, will be handling 100 million subscribers very soon. No one in the history of mobile phones has managed 100 million subscribers on a system. The question is, what platforms are available that can handle 100 million subscribers? There aren’t any. You can’t draw upon the expertise of Verizon or NTT Docomo. How are we going to manage seamless roaming, billing systems and so on? Scalability of platforms becomes a huge opportunity. Innovation in the wireless space here, such as billing systems and provisioning systems will be a big area for us.
How many people do you plan to have on the ground here?
Niran (Shah) is our first hire. We’re looking to add two more managing directors, and associates and so on. Niran will look at consumer Internet, media and mobile investments.
What percentage of your current investment portfolio is in India?
The active portfolio now is about 60-70 companies. Of this, India would be about 10 percent. And this will grow, as we add more people here.
Will your investing style change as well? Will you (Haque) continue to be as hands-on in India?